Home Health & Hospice Week

Medicare PPS rates to increase 2.5 percent in 2006.

Your payment rates could look drastically different starting Jan. 1, depending on where you operate. And for some providers, that will mean a big decrease in reimbursement.

The Centers for Medicare & Medicaid Services has proposed increasing the prospective payment system base rate for a 60-day episode to $2,320.89 in calendar year 2006, according to a proposed rule slated to appear in the July 14 Federal Register. That's 2.5 percent more than the current rate of $2,264.28. (See chart, this page, for new per-visit rates.)

The inflation update for home health agencies should be 3.3 percent, but the Medicare Modernization Act mandated a 0.8 percent reduction to that figure. The increase will add $330 million to HHA payments next year, CMS estimates.

"The American Association for Homecare advocates a full market basket update to account for rising costs for skilled nurses, therapists, transportation and insurance," AAH President and CEO Kay Cox says in a release. HHAs must invest in health information technology and other areas too, Cox adds.

No Transition to New Wage Index System

But the biggest change in the 2006 PPS update involves the wage index portion of the rate. The Office of Management and Budget issued changes to the labor market area divisions in 2003, and CMS proposes to adopt them for wage index Jan. 1, the rule says.

The new system uses Core-Based Statistical Areas (CBSAs), replacing the old Metropolitan Statistical Area (MSA) designations, the regulation explains. CMS already proposed the CBSA switch for hospices earlier this year (see Eli's HCW, Vol. XIV, No. 17).

The new CBSAs will boost areas that used to be designated as rural into higher-paying CBSA areas. But formerly higher-paying areas also will go down to lower-paying CBSAs.

"The National Association for Home Care & Hospice is very concerned that CMS has failed to analyze the impact of this wage index change on home health agencies," NAHC says. While the overall impact isn't marked, certain local areas will see drastic wage index changes as a result.

Transition needed: And CMS should grant HHAs the same right hospitals received when they switched to using CBSAs last Oct. 1. That means a phase-in period, NAHC protests. The association plans to recommend a transition period when the difference in the old MSA wage index and the new CBSA wage index exceeds 1 percent.

In the regulation, CMS claims no transition period is necessary because agencies furnish services in multiple geographic areas and because many HHAs' wage indices will increase. The CBSA switch will increase rural providers' payments 0.7 percent, the agency maintains.

But many areas will see a substantial decrease, NAHC points out. For example, a Warren County, NJ agency would have an MSA wage index of 1.2141, but a CBSA wage index of only 0.9828. That translates to a $412 loss per episode on the base PPS rate. Likewise, a Nye County, NV provider's wage index would drop from 1.1166 to 0.9074, the trade group says. That's a $373 difference per episode for the base rate.

The CBSA change "highlights the ongoing volatility and instability of the wage index," NAHC argues. "The proposal to transition to CBSAs [is] one more reason for wholesale transformation of the home health wage index."

Particularly offensive is the fact that hospitals can obtain reclassification into a higher-paying wage index category, but HHAs in that area can't use the reclassified status because CMS uses the pre-classified index for the industry.

Barring agencies from using the reclassified index "creates an uneven marketplace for health care employers seeking to hire and retain comparable staff," NAHC says.

New England States Gain, Midwest and Plains States Don't

Rural HHAs come out the winners under the new CBSA system. Rural providers overall will see a 3.5 percent payment increase from 2005 to 2006, compared to a 2.3 percent increase for urban providers, CMS estimates. Freestanding rural agencies will see the biggest boost with a predicted 3.7 percent increase.

The lowest rate of increase is in the East and West North Central Regions (IA, IL, IN, KS, MI, MN, MO, NE, ND, OH, SD, WI), where urban providers will see a slight 1.5 percent bump-up next year, CMS says.

The highest boost is in the New England region (CT, ME, MA, NH, RI, VT), where rural providers will see a 5.7 percent increase under the proposal.

Give your two cents: Comments on the proposal are due Sept. 6, CMS notes.

This is the second year HHAs will see their payment update on Jan. 1 instead of Oct. 1, as mandated by MMA. 

Note: The 189-page proposed rule is at www.cms.hhs.gov/providers/hha/cms1301p.pdf.